Distimo: China Now The Second Largest iPhone App Market After The U.S.

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After reporting the Android Market’s increasing rate of growth in April’s research, app store analytics company Distimo is releasing a new study that focuses on Apple’s App Store development in Asia. The company took a look at iOS app data in China, Hong Kong, India, Indonesia, Japan, Malaysia, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam.

One of the key findings from the report is that while some Western countries witnesses a decrease in download volume (France and Germany), iPhone app download volume in Asian countries has grown significantly in the past six months in the Apple App Store. In fact, Distimo says that China recently became the second largest market after the United States. That’s pretty fast growth considering Apple only opened a tailored App Store for China last Fall.

Compared to the relatively small size of the population, South Korea is seeing increased traction in iPhone app download volume. In fact, download volume is higher than in Germany and France. Interestingly, the Games category is absent in the Apple App Store for iPhone in South Korea, so all downloads are allocated to non-Games. In other countries, the Games category is without exception, the largest.

However, the proportion of paid downloads and the overall revenue still lag behind that of the United States and Europe. Distimo reports that customers in Asian markets are more inclined to download a free version of an app vs. pay for an ad-free version. The average download volume of the 300 most popular applications (free and paid) in all Asian countries combined is about equal to the average volume in the United States.

But for paid applications only, this ratio drops to one-third, showing that iPhone users in the United States are more eager to pay for applications. Excluding Japan, this figure even drops to one-sixth.

Distimo says that Japan actually generates the majority of the revenue in Asia regarding iPhone apps. The total revenue in Asia is about two-thirds of the revenue in the United States. This figure is higher than one-third due to the higher average selling prices of the 300 most popular applications in Asia ($2.62) compared to the United States ($1.48).

Moreover, in-app purchases have not yet taken off in Asia. For example, in China only 34% of the revenue from the 200 top grossing applications originates from applications that feature in-app purchase. But that doesn’t mean that in-app purchases could quickly scale in Asian markets in the coming year. In the U.S., in-app payments nearly doubled in a year. Distimo says in June 2010, revenue from applications that feature in-app purchase in the United States was only 39%, however by May 2011 it increased to 68%.

Distimo reports that the majority of the most popular iPhone applications in Asia are only popular in Asia, but in some Asian countries worldwide popular applications prevail. Popular regional only content are KungFu Food-Panda, and Birzzle.

It also appears that these localized apps are more popular in Asia. In Asian countries, an average of 34% of the most popular applications are only popular within the region. In the United States and Europe, only 20% of the applications are aimed specifically at North America and Europe, respectively.

And in Asia, localization is also segmented by country. iPhone users in China, Hong Kong, Japan, South Korea and Taiwan have a preference for applications aimed at the region. In China for example, 65% of the 300 most popular free applications are regionally popular only. In South Korea, 87% of free and 78% of paid applications are regionally aimed, respectively.

But, Distimo says in general, localization appears to be key to becoming popular especially when considering countries like China, South Korea, and Japan. In countries like India and Indonesia, localization appears to be less popular.